Experts are sharing insights on the South African Reserve Bank's decision to lower the interest rate by 0.25 percentage points, a move expected to significantly impact consumers, businesses, and the overall economy.
Lew Geffen Sotheby's International Realty CEO Yael Geffen says the second consecutive 25 basis-points cut to the prime lending rate is not yet enough to make a significant difference -- but is still a step in the right direction for embattled South African consumers heading into the festive season.
The new repo rate set at the Monetary Policy Committee's (MPC) final meeting of the year this week means a cut of approximately R340 on a new bond of R2 million, at prime.
"Any cut to the repo rate right now is good news, and business understands that SA Reserve Bank Governor Lesetja Kganyago needs to act cautiously, balancing what consumers are crying out for, with what is in the longer-term interests of the country's economy.
"We take all the good news we can get, like the fact that annual consumer price inflation for October was only 2.8%, down from 3.8% in September 2024. It's below the Reserve Bank's target and the lowest inflation since the height of the pandemic in June 2020, when the rate was 2.2%.
Stash rate cut savings in your bond for major benefits
This week's interest rate cut of 25 percentage points brings the repo rate to 7,75% and the prime lending rate to 11,25% - and also creates a golden opportunity for homeowners to start shortening their home loan repayment periods and saving themselves many thousands of rands on the eventual cost of their properties.
That's the word from Stephen Whitcombe, MD of the Firzt Realty group, who notes that the latest rate drop represents a monthly repayment reduction of just R17 per R100 000 of a 20-year bond borrowed at prime, and that while this might not seem significant, it adds up to R172 a month on a R1m bond and R343 a month on a R2m bond, as Table 1 below shows.
"This comes on top of the repayment reductions brought about by the 25 percentage point interest rate cut in September and will undoubtedly make it easier for potential homebuyers to qualify for home loans and afford the monthly repayments. On a first-time-buyer home loan of R750 000 borrowed at prime, for example, the qualifying income is now around R26 200, compared to just over R27 000 in August, and the minimum monthly repayment is now R7870, compared to R8130.
"Equally important though, is the fact that these rate cuts and those predicted for next year hold out the prospect of big future benefits for existing homeowners if they decide to put all the monthly repayment savings back into their home loans now instead of spending the extra cash. All they need to do is maintain their repayments at the same level as they were in August, and the fact that inflation rate has dropped so much in the past few months (to 2,8% in October) should make it relatively easy to do this without feeling too much strain on household budgets."
Impact of today's interest rate reduction on commercial property
John Loos - Senior Economist: FNB Commercial Property Finance
While the 25-basis point interest rate cut alone is likely to have a limited impact on demand in the commercial property market, it is the second in an anticipated series of mild interest rate reductions. Cumulatively, these cuts are expected to gradually breathe more life into the market as we move into 2025. Commercial property buyer and investor demand will likely strengthen slowly throughout 2025, as this market is typically more correlated with economic growth than interest rate movements, compared to the more interest rate-sensitive residential market. Much of the impact of interest rate cuts on commercial property buyer and investor demand is expected to be indirect-via the influence that lower interest rates have in boosting real economic growth, which, in turn, drives demand for commercial space and improves property income.
Rate cuts expected to boost summer sales surge
The spring-into-summer home sales surge that usually occurs at this time of year is bound to be given additional impetus by this week's interest rate drop, says Berry Everitt, CEO of the Chas Everitt International property group.
The 25 basis point rate cut, which comes on the back of the inflation rate declining sharply to 2,8% in October from 3,8% in September, brings the repo rate to to 7,75% and the prime lending and base home loan rate to 11.25%.
"This will mean lower repayments on all sorts of debt, including car finance, personal loans and credit card balances as well as home loans, and combined with a lower cost of living, will create significant financial relief for most households.
Latest interest rate cut an opportunity for good financial planning
Tyson Properties CEO, Chris Tyson, today welcomed a second interest rate cut.
Although Tyson - and most of the country's economists - expect the Reserve Bank's MPC to continue to cut rates during the first half of next year with at least another 0.5 bps to be shaved off the prime lending rate, he believes that consumers must learn from past mistakes by decreasing their debt and either saving the difference or continuing to repay the same amount on their home loans in order to rapidly reduce what is probably their largest monthly expenditure.
"Rather than your repayments being predominantly interest with a small amount credited to the capital borrowed, homeowners can increase that balance and score by paying off their bond in a shorter timeframe. The benefit of this saving is that it cannot attract tax as it is simply a future cost reduction and not income," he says.
More good news, rate cut welcomed for property and economy, but more needed, says Seeff
The decision by the Reserve Bank to cut the repo rate by 25bps is welcome news for property and the economy, but more is needed, says Samuel Seeff, chairman of the Seeff Property Group. This brings the repo rate down to 7.75% and the prime rate to 11.25%.
While welcomed, Seeff notes that the Bank missed an opportunity to provide a more meaningful 50bps cut and a real economic boost. Especially, given that inflation dipped beyond expectation to just 2.8% (from 3.8% in September), putting it below the target range of 3%-6%. It is also the lowest since the pandemic and below the pre-pandemic level of January 2020 when the prime rate was reduced to 9.75%.
While this rate cut is set to inject further energy into the housing market, Seeff says more is needed to kickstart the economy. It desperately needs growth and a push for jobs, and lower interest rates are needed to do that. On the back of more positivity flowing from the GNU (Government of National Unity), the lower interest rate, lower inflation, and continued absence of loadshedding, the economy and property market is poised for growth, but can do with more rate cuts.
Seeff anticipates the residential property market to rerate in 2025. Where we've seen subdued or benign to no growth scenarios for many months, and years in some areas, he believes it will start turning next year in terms of higher volumes, price, and values.
More relief as interest rates drop further
Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, says that this cut was well timed and is grateful for the more favourable market conditions that are likely to follow.
"The effect of any interest rate cut is usually felt several months later once the market has adjusted to the lower rates. Coming off the back of an interest rate cut in September, this further cut should line us up for more favourable property market conditions in the months to follow," says Goslett.
Further repo rate cut will provide impetus to housing market activity
Dr Andrew Golding, chief executive of the Pam Golding Property group. This takes the prime rate to 11.25%, a level last seen in April 2023.
"This second reduction in the repo rate will provide further impetus to activity in the housing market - particularly among first-time buyers - who had already begun responding positively to the previous interest rate cut in September (2024).
"Lower rates make purchasing a home more affordable and also encourage those who would like to move for retirement, downsizing, and relocating for various reasons, who had paused potential acquisitions due to the higher interest rate environment, to commit to purchasing decisions".
New interest rate drop: What savvy South Africans should do next
Leonard Kondowe, Rawson Finance's National Manager
The South African Reserve Bank (SARB) has just announced another 25-basis-point cut in the interest rate, bringing the prime lending rate to 11.25%. This reduction may seem modest, but experts say it's a tangible step towards making debt more manageable for South Africans - a welcome relief as the festive season approaches.
What the rate cut means for consumers' wallets
The impact of a rate reduction reaches deep into the financial lives of South Africans. For those with home loans, vehicle finance, and other credit commitments, this cut will ease monthly repayments, offering some relief on debt-related expenses. However, Kondowe urges consumers to avoid the temptation to splurge with the extra disposable income.
"Instead, stick to your current repayment amounts if possible, to pay off debts faster," he suggests. "This approach not only builds financial security but also reduces the total interest you pay over time - a benefit that compounds considerably over the life of a typical home loan."
Looking toward early 2025, Kondowe is cautiously optimistic about consumer confidence.
A festive season boost for consumers
Antonie Goosen, principal and founder of Meridian Realty, says the announcement is a positive development for both consumers and the property market. "This slight decrease in interest rates brings much-needed relief to South Africans, particularly those with home loans, vehicle finance, or other forms of credit," he explains.
For homeowners with bonds linked to the prime lending rate, the reduction translates to slightly lower monthly repayments. "On a bond of R1 million, for example, this cut could save homeowners around R150 per month. While this may not seem significant, it adds up over time, especially as families look to manage their finances over the holiday season," Goosen notes.
The rate cut also creates opportunities for prospective buyers. Goosen explains that lower borrowing costs make homeownership slightly more accessible. "For first-time buyers, this could be the nudge needed to step into the market. Coupled with motivated sellers keen to close deals before the year ends, now could be the perfect time to consider purchasing property," he says.
Goosen urges South Africans to use the rate cut wisely. "This time of year often sees increased spending on travel, gifts, and celebrations, which can lead to financial strain. My advice is to avoid overextending yourself and, where possible, use the savings from this rate cut to reduce debt or invest in long-term goals," he advises.
Goosen believes the rate cut could stimulate activity in the property market. "For sellers, the reduced interest rate might attract more buyers, particularly in early 2025 when the market traditionally picks up. This is a good time to ensure your property is market-ready and competitively priced," he says. For buyers, the rate cut slightly improves affordability. "This small reduction can enhance purchasing power, allowing buyers to stretch their budgets when considering offers," Goosen explains.
https://www.property24.com/articles/experts-react-to-another-sarb-025-interest-rate-cut/32456